Contents

Abstract

Global and regional value chains (GVCs) are an important way of
organizing production, trade, and investment in a wide variety of
sectors. The term “value chain” refers to the full range of processes
involved in the design, production, and distribution of a final product.
It stretches from upstream activities (e.g. research and development) to
downstream activities such as assembly, distribution, marketing, and
after-sales service. The distinctive property of GVCs is that these
activities are spread across multiple countries, often neighbouring, but
sometimes in different parts of the world. Each firm in a GVC
specializes in a particular task, while the lead firm brings all the
various tasks together through the supply of headquarters services,
coordinating all inputs of goods and services to produce the final
product and get it to the consumer.

This offers a new model to developing countries looking to build up
their industrial base. In themselves, GVCs are neither wholly good nor
wholly bad for development. On the positive side, they offer relatively
low-cost ways of linking to international trade networks, and allow
countries to specialize in activities that are aligned with their
comparative advantage. Developing countries can benefit through income
and employment effects, even if they specialize in low-value-added
activities, such as assembly. However, concerns have been expressed that
GVCs risk locking countries into those activities, and not promoting
industrial or social upgrading over time. Clearly, the challenge of
moving up a value chain into higher-value-added activities (which
typically have important economic spillovers) looms large for many
developing countries.

This paper does not seek to resolve the ongoing debate over the
development merits of GVCs. Instead, it starts from the position that
GVCs can - under the right circumstances, with appropriate complementary
policies - offer important economic and development benefits to
developing countries. Against that background, the motivating question
for this paper is: how can traditionally marginalized countries in
Sub-Saharan Africa (SSA) join GVCs, and improve their position in the
global network of value-added trade? In particular, what is the role of
regional approaches to infrastructure and trade facilitation policies?

Among the conclusions drawn are that SSA countries are relatively
marginalized for GVCs, while being reliant on external markets as
sources of demand for their exports, with weak intra-regional links.
More encouragingly, improving infrastructure and trade facilitation do
help African countries to connect better to GVCs. There is a clear
positive association between both sets of policies and value chain
connectivity, particularly in textiles and clothing, and maritime and
air connectivity are especially important determinants of
value-added-trade performance. Finally, the regional dimension matters:
a strong positive association exists between infrastructure and trade
facilitation improvements in neighbouring countries, and greater value
chain connectivity at home. It is therefore not just what a country does
that matters for its connectivity, but also what its neighbours do.